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A fair value gap (FVG) is a three-candle price pattern in which a strong middle candle moves so quickly that the wicks of the first and third candles don't overlap. The price range between those two wicks is the fair value gap. Traders mark it because it shows where price moved in one direction with little two-way trading, and many watch that range in case price returns to it.
A note on terminology. "Fair value gap" is the term most commonly associated with ICT-style trading education. At Scalping Hub, we generally call the same structure an imbalance. In this article, "imbalance / FVG" refers to the same three-candle structure.
One distinction matters from the start: an imbalance is not the same thing as inefficiency. An imbalance is a specific price structure: an area on the chart. Efficiency and inefficiency describe how price has been delivered. The two are related, but they are separate concepts, and this article keeps them separate.
This guide covers how FVGs form, bullish vs bearish gaps, what can happen when price returns to one, and how Scalping Hub positions the imbalance within its wider framework. It is education, not a trading signal: an FVG is one piece of chart context, never a prediction on its own.
What is a fair value gap?
A fair value gap is the price range between the wicks of candle 1 and candle 3 in a three-candle sequence. It is created when price moves through that range so quickly that those two candles never trade over the same prices. Definitions vary slightly between educators. This article uses the most common one, the three-candle wick-to-wick range, which is also the structure Scalping Hub calls an imbalance.
An FVG is not a traditional price gap. An opening or weekend gap appears when the market reopens at a different price from its last close, leaving a literal break on the chart. An FVG forms inside continuous trading: every candle connects, but the move is one-sided enough that candles 1 and 3 never overlap.
How a fair value gap forms
An FVG forms when one strong, one-directional candle (often called displacement) pushes price far enough that the candles on either side of it don't overlap.
The sequence usually looks like this:
- Candle 1 trades in a normal range.
- Candle 2 is the large, fast candle. Its body covers a lot of distance with relatively small wicks against the move.
- Candle 3 trades beyond the relevant wick of Candle 1, leaving a non-overlapping price range between the two candles.
The imbalance / FVG is the price range between Candle 1's relevant wick and Candle 3's relevant wick.
Bullish vs bearish fair value gaps
A bullish FVG forms during an upward move. The gap runs from the high of candle 1 to the low of candle 3, and it exists only if candle 3's low stays above candle 1's high.
A bearish FVG forms during a downward move. The gap runs from the low of candle 1 to the high of candle 3, and it exists only if candle 3's high stays below candle 1's low.
| Bullish FVG | Bearish FVG | |
|---|---|---|
| Move direction | Up (upward displacement) | Down (downward displacement) |
| Upper boundary | Candle 3 low | Candle 1 low |
| Lower boundary | Candle 1 high | Candle 3 high |
| What traders watch for | Price returning down into the gap | Price returning up into the gap |
How to identify an FVG on a chart
To spot a fair value gap, find a strong displacement candle, then check whether the wicks of the candles before and after it fail to overlap. If they don't overlap, mark the price range between them.
A practical way to work through a chart:
- Find displacement. Look for a candle that is clearly larger and more one-directional than the candles around it.
- Check the neighbors. Compare candle 1's wick with candle 3's wick. If they overlap, there's no FVG.
- Mark the boundaries. Draw the top and bottom of the gap as a box or two horizontal lines.
- Note the context. Where does the gap sit relative to recent highs and lows, the higher-timeframe picture and any liquidity that was just taken?
- Treat the whole range as the area. Scalping Hub considers the entire imbalance, from its beginning to its end, rather than a single level inside it (more on the 50% midpoint below).
How do you know if an FVG is "valid"? There's no universal test. In general trading education, traders tend to give more weight to a gap that forms from clear displacement and sits in a meaningful location within the higher-timeframe picture. Spotting the structure is only the first step. What it means depends on the wider price-delivery context, covered in the framework section below.
Which timeframe is best? FVGs appear on every timeframe. Lower timeframes produce many more of them, and more noise, so many traders mark FVGs on a higher timeframe for context and use lower timeframes for detail. The right combination depends on your approach, not on a single "best" setting.
How Scalping Hub frames the imbalance: liquidity, efficiency and imbalance
Most explanations of FVGs stop at the pattern. Scalping Hub teaches the imbalance as one of three objective concepts that help explain how price is delivered:
- Liquidity
- Efficiency / inefficiency
- Imbalance
Within the Scalping Hub framework, these three don't play the same role:
- Liquidity and efficiency are what price chases. They act as the destinations, or objectives, in the delivery of price.
- The imbalance is the area through which price can reverse, or change delivery. It is not simply another target.
An analogy. Picture price as a car leaving home and travelling toward a destination. Liquidity and efficiency are the destinations. Once the car arrives, it doesn't need to keep driving in the same direction indefinitely. If it is going to turn around, it needs somewhere to do it. In this framework, the imbalance is the roundabout: the place where a change of direction can happen.
That is why, within the Scalping Hub framework, an imbalance must be tapped before price is considered capable of reversing. The imbalance is treated as the area through which price can change delivery.
This is a Scalping Hub teaching principle, not a universal market law. It is not a standalone trading signal and not a guarantee that price will reverse.
Fair value gaps and liquidity
Liquidity, in general terms, refers to areas where resting orders can build up, commonly above highs and below lows. It is a broader idea than "where stop losses sit."
Within the Scalping Hub framework, not all liquidity is equal. The strength, or significance, of the liquidity matters: the more significant the liquidity, the more meaningful it can be as an objective for price delivery. Scalping Hub distinguishes between major, medium and minor liquidity.
Liquidity and imbalance are connected through the way price is delivered:
- A liquidity event can create the conditions for a strong displacement.
- That displacement can leave an imbalance / FVG behind.
- The liquidity and efficiency objectives remain part of the broader path price is delivering toward.
- The imbalance can then provide the area through which price may pull back or change direction.
To learn how liquidity events look on a chart, read our Liquidity Sweep guide.
Scalping Hub also uses a proprietary Liquidity Formula: a single formula that works through four phases. It helps identify which liquidity objective price may be working toward next, how price progresses toward that objective, and which imbalance may provide the area for a subsequent pullback or change in delivery. Each time liquidity is taken, the framework progresses into the relevant phase. How to identify the Liquidity Formula, how its phases develop and what to do when the formula fails are taught inside Core Membership; the mechanics aren't disclosed publicly.
What happens when price revisits a fair value gap?
When price comes back to an FVG, it may react, trade partway into the range, trade through all of it, or move straight past it. None of these outcomes is guaranteed, and some gaps are never revisited.
A few terms come up here:
- Partial fill (mitigation): Price trades back into part of the gap, then moves away. Traders often say the gap has been "mitigated" or "tapped."
- Full fill: Price trades through the entire range.
- Consequent encroachment (CE): The term commonly used for the 50% midpoint of an FVG in ICT-style trading education.
How Scalping Hub treats the 50% midpoint. CE is a recognized concept, and many traders use it. Within the Scalping Hub framework, however, we don't give the 50% midpoint any special significance. We consider the entire imbalance, from its beginning to its end, as one area of interest.
If the relevant liquidity has been tapped and price then returns into the imbalance, the interaction can matter at any point within that area. It can be at the near edge, around the middle, deeper inside, or further through it. Price does not need to reach the 50% midpoint for the imbalance to be relevant. How deep the tap goes is contextual and subjective, and its significance depends on the wider context, including the liquidity event and price delivery.
One point of sensitivity: within the Scalping Hub framework, when an imbalance forms immediately after a liquidity event, the beginning, or near edge, of that imbalance can be particularly sensitive. In that situation, the interaction can begin from the start of the imbalance; price doesn't need to travel halfway through before the imbalance becomes relevant. This isn't a rule that price will react at the edge or can't trade deeper. The entire imbalance remains the area of interest.
Fair value gaps and market structure
An FVG means more when you read it alongside market structure: the sequence of highs and lows that shows whether price is trending, ranging or shifting direction.
A displacement that breaks a recent swing high and leaves a bullish FVG tells a different story from a similar-looking gap in the middle of a choppy range.
Our Break of Structure guide explains how Scalping Hub reads those breaks, including the difference between a fake and a true break.
FVG vs related concepts
Several terms overlap with FVGs. Here's how they relate.
FVG vs imbalance. In Scalping Hub's terminology, these are the same three-candle structure: "FVG" is the common ICT-style name, and "imbalance" is the term we use. Be aware that some other educators use "imbalance" more loosely for any one-sided move.
Imbalance vs inefficiency. These are not the same. An imbalance is a defined area on the chart. Efficiency and inefficiency describe the condition of price delivery. Within the Scalping Hub framework, efficiency is one of the objectives price chases, while the imbalance is the area through which price can change direction.
FVG vs volume imbalance. Some educators use "volume imbalance" for a different structure: a gap between candle bodies where the wicks still overlap. Usage isn't consistent, and it is not what Scalping Hub means by an imbalance.
FVG vs order block. The two often appear side by side, so they're easy to confuse:
- Imbalance / FVG: the three-candle gap created by displacement.
- Order block: the opposing candle before that displacement.
Not every order block is meaningful, though. The opposing candle before displacement gives you the structural definition of an order block, but its existence doesn't automatically make it a meaningful point of interest. Scalping Hub treats order blocks as subjective. We evaluate them in the context of efficiency, inducement, protected points of interest and broader price delivery. An order block can carry more meaning when it comes from a non-inducible or protected point of interest. Simply having induced liquidity doesn't make an order block significant. Our Order Block guide covers this in more depth.
FVG vs inverse fair value gap (IFVG). An inverse FVG describes what some traders call a gap that price has closed through. The area is then watched as if it could act in the opposite role. It's a separate concept, covered in our Inverse Fair Value Gap guide.
Common mistakes when reading fair value gaps
- Marking every gap. If everything is marked, nothing stands out.
- Treating "imbalance" and "inefficiency" as the same thing. One is an area on the chart; the other describes how price is being delivered.
- Expecting every gap to fill. Some never do.
- Treating the imbalance as the destination. Within the Scalping Hub framework, liquidity and efficiency are the objectives; the imbalance is where price can change direction.
- Using the gap as the whole plan. An FVG doesn't define your risk, invalidation or position size.
- Relying entirely on indicators. Indicators mark every gap that meets their rules; judging context is still your job.
Practical considerations for scalpers
- Higher-timeframe context first. A one-minute imbalance means more when it lines up with the higher-timeframe picture.
- Session context. The trading session can be relevant when evaluating price delivery.
- Costs. On very small gaps, spreads and commissions can be a meaningful share of the range itself.
- Risk before entry. Decide your stop and size first; a position size calculator works out lot size from account size, risk and stop distance.
- Review your charts. A trading journal gives you a place to log how imbalances behaved on the instruments you trade.
For the wider picture of costs, sessions and timeframes, see our guide to scalping trading.
Frequently asked questions
Do fair value gaps always get filled?
No. Price may trade through an FVG completely, partly, or never return to it. Many traders treat a gap as an area to watch rather than a level price must revisit. How price behaves around it depends on the wider price-delivery context.
How do you identify an FVG?
Look for a strong displacement candle and compare the wicks of the candles on either side of it. If candle 1's wick and candle 3's wick don't overlap, the price range between them is a fair value gap, which Scalping Hub calls an imbalance. Mark its upper and lower boundaries; Scalping Hub treats the whole range between them as the area of interest.
Does price have to reach 50% of an FVG?
No. Within the Scalping Hub framework, the 50% midpoint has no special significance. The entire imbalance is considered, and price doesn't need to reach the midpoint for the imbalance to be relevant. Consequent encroachment (CE) is the ICT-style term for that 50% midpoint. It is a recognized concept, but it isn't a special level in the Scalping Hub framework.
What does a bullish FVG mean?
A bullish FVG is the gap between candle 1's high and candle 3's low during a strong upward move. It shows that price moved up through that range with little two-way trading. Some traders watch it as a potential area of interest if price later pulls back into it.
Which timeframe is best for FVGs?
There isn't a single best timeframe. FVGs form on all of them, but lower timeframes produce many more, so many traders mark gaps on a higher timeframe for context and use lower timeframes for detail.
Is FVG a good trading strategy?
An FVG is a way of reading price, not a complete strategy. It doesn't tell you where to place a stop, how much to risk or when you're wrong. Traders who use FVGs combine them with broader context such as market structure, liquidity and risk management.
Is there an FVG indicator on TradingView?
Yes. TradingView's public library includes community-built scripts that mark fair value gaps automatically. They can speed up chart marking, but they flag every gap that meets their rules, so you still need to judge which ones matter.
Is an FVG the same as an imbalance?
In Scalping Hub's terminology, yes: "FVG" is the common ICT-style term, and "imbalance" is what we call the same three-candle structure. An imbalance is not the same as inefficiency, which describes how price has been delivered.
Next step: learn how order blocks work
Imbalances and order blocks often appear side by side, but they aren't the same thing, and not every order block is meaningful. Read our Order Block guide next.
Trading involves risk. This article is for education only and is not financial advice. Scalping Hub does not provide signals or manage money.
